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It might not have been a surprising move, but NorthPoint Communications Inc.'s filing for Chapter 11 bankruptcy protection might produce some surprising future developments.
NorthPoint sought protection from its creditors on Jan. 16, blaming Verizon Communications's decision to cancel its planned $1.3 billion investment in the DSL provider for creating a "significant funding shortfall."
The company asked the U.S. Bankruptcy Court for the Northern District of California to approve a commitment of up to $38 million in debtor-in-possession financing from its existing lenders. San Francisco-based NorthPoint said the consortium of banks had agreed to make $25 million available immediately and the remaining $13 million available upon the satisfaction of certain conditions.
NorthPoint is seeking bankruptcy court approval of open bid procedures to begin auctioning off its assets. President and chief executive officer Liz Fetter estimates the company's assets are worth about $500 million, while its debts total about $485 million, NorthPoint spokesman Marvin Wamble says.
"We intend to find a strategic partner through a structured sale of the company's business and assets," Fetter said during a conference call with analysts and investors. "In the meantime, NorthPoint will continue with business as usual until the sale is completed."
The goal is to emerge from Chapter 11 as soon as possible once a strategic partner, capable of putting the company on sound financial footing, is found, Fetter adds.
NorthPoint and Verizon have sued each other since Nov. 29, when Verizon announced it was pulling out of the deal to acquire 55 percent of NorthPoint for $800 million in cash and more than $500 million in assets. Verizon bailed out of the proposed acquisition after the DSL provider restated third-quarter sales, lowering them because some of its Internet Service Provider (ISP) customers couldn't pay their bills.
NorthPoint's efforts to find new funding after Verizon pulled out haven't been successful and what little hope, if any, remains for the company's shareholders may lie in the lawsuit against Verizon, said Morningstar analyst Michael Hodel. NorthPoint is seeking more than $1 billion in damages from the regional telephone company.
In December, the company blamed the failed Verizon transaction as it eliminated 248 jobs, or 19 percent of its workforce.
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